CFA level 1 formula sheets sample

Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages

CFA® EXAM REVIEW

FORMULA SHEETS

COVERS ALL TOPICS

IN LEVEL I

LEVEL I

2016

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada

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Financial analysis techniqUes

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46

Financial Analysis Techniques

Inventory Turnover

Cost of goods sold Average inventory

Inventory turnover=

Days of Inventory on Hand

= 365 Inventory turnover

Days of inventory on hand (DOH)

Receivables Turnover

= Revenue Average receivables

Receivables turnover

Days of Sales Outstanding

= ( ) 365

Receivables turnover

Days of sales outstanding DSO

Payables Turnover

= Purchases Average trade payables

Payables turnover

Number of Days of Payables

= 365 Payables turnover

Number of days of payables

Working Capital Turnover

= Revenue Average working capital

Working capital turnover

Fixed Asset Turnover

= Revenue Average fixed assets

Fixed asset turnover

Total Asset Turnover

Revenue Average total assets

Total asset turnover=

Current Ratio

= Current assets Current liabilities

Current ratio

Quick Ratio

=Cash Short-term marketable investments Receivables+ +

Current liabilities

Quick ratio

Cash Ratio

=Cash Short-term marketable investments+

Current liabilities

Cash ratio

Defensive Interval Ratio

= Cash Short-term marketable investments Receivables+ +

Daily cash expenditures

Defensive interval ratio

Cash Conversion Cycle

=DSO DOH Number of days of payables+ −

Cash conversion cycle

Debt‐to‐Assets Ratio

=

- - Total debt

Total assets

Debt to assets ratio

Debt‐to‐Capital Ratio

- - Total debt

Total debt Shareholders’ equity

Debt to capital ratio=

+

Debt‐to‐Equity Ratio

- - Total debt

Shareholders’ equity

Debt to equity ratio=

Financial Leverage Ratio

= Average total assets Average total equity

Financial leverage ratio

Interest Coverage Ratio

= EBIT Interest payments

Interest coverage ratio

Financial analysis techniqUes

© Wiley 2016 all Rights Reserved any unauthorized copying or distribution will constitute an infringement of copyright

48

Fixed Charge Coverage Ratio

= +

+

EBIT Lease payments Interest payments Lease payments

Fixed charge coverage ratio

Gross Profit Margin

= Gross profit Revenue

Gross profit margin

Operating Profit Margin

= Operating profit Revenue

Operating profit margin

Pretax Margin

=EBT (earnings before tax, but after interest)

Revenue

Pretax margin

Net Profit Margin

= Net profit Revenue

Net profit margin

Return on Assets

= Net income Average total assets

ROA

= Net income Interest expense (1 Tax rate)+ −

Average total assets

Adjusted ROA

Operating income or EBIT Average total assets

Operating ROA=

Return on Total Capital

=

+ +

EBIT Short-term debt Long-term debt Equity

Return on total capital

Return on Equity

= Net income Average total equity

Return on equity

Return on Common Equity

= Net income Preferred dividends− Average common equity

Return on common equity

DuPont Decomposition of ROE

Net income Average shareholders’ equity

ROE=

2‐Way Dupont Decomposition

Net income Average total assets

Average total assets Average shareholders’ equity ROA Leverage

↓ ↓

3‐Way Dupont Decomposition

Net income Revenue

Revenue Average total assets

Average total assets Average shareholders’ equity Net profit margin Asset turnover Leverage

↓ ↓ ↓

5‐Way Dupont Decomposition

Interest burden Asset turnover

Net income EBT

EBT EBIT

EBIT Revenue

Revenue Average total assets

Average total assets Avg shareholders’ equity Tax burden EBIT margin Leverage

↓ ↓

= × × × ×

ROE

Price‐to‐Earnings Ratio

=

/ Price per share

Earnings per share

P E

Price to Cash Flow

= / Price per share

Cash flow per share

P CE

Price to Sales

/ Price per share

Sales per share

P S=

Price to Book Value

Price per share